FTSE 100 mining company ENRC must openly address Congo corruption concerns
Eurasian Natural Resources Corporation (ENRC), one of the largest mining groups listed on London’s stock exchange, must publicly address concerns over corruption risks associated with its rapid acquisition of mining assets in the Democratic Republic of Congo, said Global Witness in a memo to ENRC’s shareholders published today.
Between September 2009 and July 2011, ENRC acquired over $2 billion of copper and cobalt mines in Congo. All of these deals have been acquired in apparent collusion with the controversial businessman Dan Gertler, who is a friend of Congolese President Joseph Kabila.
The deals have seen ENRC make large payments to offshore and secretive shell companies associated with Mr Gertler. These offshore companies secretly snapped up prize mining assets at vastly undervalued prices and quickly sold them on to ENRC – in one case quickly flipping a mine to ENRC for five times the original value paid. Global Witness is concerned that corrupt Congolese officials could be among the beneficiaries of these deals.
“The nature of these deals raises serious questions about whether corrupt Congolese officials could be benefitting from Congo’s considerable mineral wealth at the expense of the Congolese people,” said Daniel Balint-Kurti, Campaign Leader for the Democratic Republic of Congo at Global Witness. “The Congolese state has foregone billions of dollars in revenues by secretly selling off its assets on the cheap to offshore companies. With so much at stake in one of the poorest countries on the planet, ENRC must do the right thing and shed full light on its dealings.”
In mid-May, Global Witness submitted a detailed list of questions relating to ENRC’s dealings with Mr Gertler to both ENRC and the law firm Dechert, which acts as the company’s anti-corruption auditor. ENRC must provide full answers to these questions and publish them if it wishes to end controversy over its activities in Congo. ENRC’s chairman, Mehmet Dalman, has said he expects to have examined the results of an external audit into corruption allegations by the end of June. In a statement sent to Global Witness as we were going to press, ENRC said: “ENRC has a zero-tolerance policy to bribery and corruption, which extends to all of our business dealings, across all of our operations. The Board has been working extremely hard to ensure that its policies are adopted and procedures adhered to, with serious consequences for any breach of these policies and procedures.”
Global Witness has also submitted questions to Mr Gertler relating to his business with ENRC. While Mr Gertler has not provided answers to this list of questions, shortly before publication his spokesman issued a statement questioning Global Witness’s motives and saying we are funded by Mr Gertler’s competitors. The statement also said Global Witness has rejected an offer of an independent audit of the beneficiaries of companies that belong to the Fleurette Group, Mr Gertler’s holding company. These statements are incorrect. Global Witness would be happy to discuss the offer of an audit and has told the Fleurette Group so on a number of occasions.
Global Witness’s latest briefing on corruption concerns linked to Mr Gertler comes a month after it called on another FTSE 100 company, Glencore, to explain its involvement with the businessman. Both Glencore and ENRC own mining interests in Congo worth billions of dollars, and for both these companies their assets are tightly wound up with Mr Gertler’s interests.
“ENRC shareholders should be taking a close look at the corruption risks being run by their company in Congo,” said Balint-Kurti. “ENRC should cease conducting business with offshore entities whose beneficiaries are not publicly declared and which pose significant corruption risks. As shareholders gather for the ENRC AGM, they should be demanding that the company takes convincing action against corruption and stops conducting business in such a secretive manner.”
ENRC has defended its record on corruption in Congo.. Mr Gertler and Glencore have similarly denied any involvement in corruption in Congo, while also challenging the facts presented by Global Witness. These views are reflected in greater detail in Global Witness’s briefings.
Daniel Balint-Kurti, +44 (0) 207 492 5872 and +44 (0) 7912 517 146; firstname.lastname@example.org
Notes to editors:
- Further information about Global Witness's investigation into the “secret sales” scandal can be found at www.globalwitness.org/secretsales.
- The documents available from the Global Witness website include: Global Witness’s memo to ENRC’s shareholders, Q&A on ENRC’s links to the “secret sales” scandal, the list of questions sent by Global Witness to ENRC on 15th May, the list of questions sent by Global Witness to Mr Gertler’s spokesman on 14th May, the statement by Dan Gertler’s spokesman regarding Global Witness on 11th June, the response by ENRC to Global Witness on 11th June.
- The 9th May memo to Glencore’s shareholders as well as supporting documents is also available at www.globalwitness.org/secretsales.
- For ENRC’s stance on corruption, see its Code of Conduct at http://www.enrc.com/en-GB/Media1/Code-of-Conduct/.
- For recent valuations of some of ENRC’s most valuable assets in Congo see briefing by Renaissance Capital at http://www.centralasia.rencap.com/download.asp?id=13951.
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